Normalised Cash Flow in DCF — Working Capital, Taxes and Stable ROIC

This page describes adjustments to Terminal Value through Computing Normalised Cash Flow with Stable Capital Expenditures, Stable ROIC relative to WACC, Stable Deferred Taxes and Stable Working Capital all of which depend on projected stable growth

This file below demonstrates issues associated with capital expenditures in the terminal value. It demonstrates that you should adjust the terminal value with capital expenditures to depreciation and that the stable ratio depends on both nominal terminal growth and the depreciation rate.

This file below demonstrates issues associated with working capital in the terminal value calculation. It demonstrates that you should adjust the terminal value with a formula the begins with the working capital to EBITDA and adjust the formula with the growth rate.

This file below demonstrates issues associated with deferred taxes in the terminal value calculation. It demonstrates that in the same way that capital expenditures should be adjusted in the terminal value analysis, the same kind of adjustment should be made to deferred taxes.